McCain Slams Pentagon for Protecting Troops from For-Profit College Abuses

Senate Armed Services Committee chairman John McCain (R-AZ) held a hearing last week for the express purpose of attacking the Defense Department’s 2015 decision to temporarily ban the for-profit University of Phoenix from recruiting U.S. military service members. Even though the Pentagon’s action was based on significant evidence that the University of Phoenix had engaged in serious recruiting violations on military bases, McCain indignantly slammed the Obama Administration and the Defense Department for penalizing his home state company — a company that, by the way, has provided McCain with campaign contributions and other support over the years.

With three Pentagon officials pinned into chairs as witnesses, McCain opened the hearing by thundering from the dais that “this hearing is about how the Department of Defense, consistent with the Obama administration’s ideological hostility to for-profit universities, under pressure from at least one member of Congress, and having performed very little due diligence of its own, placed on probation a reputable and fully accredited for-profit university.” McCain called the Pentagon’s action “a gross abuse of power” that “resulted from a process that was fundamentally unfair.”

McCain later added that such a “grave injustice” had “done horrific and unacceptable damage” to the University of Phoenix, which is owned by the publicly-traded Apollo Education Group. He blamed Apollo’s falling stock price on the Pentagon decision, even though the stock has been in decline for five years. McCain also blamed the Obama Administration for the shut down of predatory, self-destructive for-profit ITT Tech. He concluded, “This kind of abuse of power I hope in the new administration will be totally unacceptable.”

McCain’s use of his committee platform to crusade for the University of Phoenix and other for-profit colleges was not surprising, because he has repeatedly gone to bat for the company and the industry, and also because of the post-election Trump triumphalism that has infected even those GOP lawmakers, such as McCain, who exchanged barbs with, and distanced themselves from, Donald Trump during the campaign.

Now that the President of Trump University is on the verge of becoming President of the United States, Republicans on Capitol Hill, many of them pilloried during the campaign for taking campaign cash from predatory colleges, appear ready to fall in love with these wealthy bad actors all over again.

The company on whose behalf McCain bullied his Pentagon witnesses is hardly a model citizen. Apollo in recent years has been under investigation, for fraud and deceptive business practices, by a range of agencies: the Department of Education, Federal Trade Commission, Consumer Financial Protection Bureau, Securities and Exchange Commission, and the attorneys general of California, Delaware, Florida, and Massachusetts. The professional law enforcement officers advancing these probes have an “ideological hostility” only to lawbreaking.

Apollo’s record of performance is just as disturbing. Department of Education data has shown that the University of Phoenix’s graduation rate for first-time, full-time students is about 16 percent, and that graduation rate for the school’s online programs is about 4 percent. A 2012 comprehensive investigative report on for-profit colleges by then-Senator Tom Harkin (D-IA) found that the University of Phoenix spent $892 per student on instruction in 2009, compared to $2,225 per student on marketing, and $2,535 per student on profit. “This,” the report found “is one of the lowest amounts spent on instruction per student of any company analyzed.” Around 25 percent of University of Phoenix students default on their loans within three years of leaving school.

Paul Rieckhoff, founder and CEO of Iraq and Afghanistan Veterans of America, said in October 2015 that the University of Phoenix has been the “worst by far“ for-profit college in terms of taking advantage of the veterans who are members of his organization. A letter sent that same month to Secretary of Defense Ashton Carter by more than 30 veterans, civil rights, and consumer organizations supported the Pentagon’s suspension of Phoenix and cited, as support, the complaints of hundreds of service members and veterans “who experienced deceptive recruiting” by the school.

Phoenix’s owner Apollo received $1.99 billion in Department of Education student loans and grants last year, an enormous amount but actually down, in part due to troubling revelations of abuses, from a staggering $3.7 billion just a few years ago. In recent years, the company also has been the top recipient of GI Bill student aid from the VA, getting as much as $272 million in a single year, and as much as $27 million a year in Pentagon tuition assistance for U.S. troops.

McCain has sought to protect those revenue streams, at a time when law enforcement has been focused on over-aggressive recruiting by for-profits, by pushing for ill-advised legislation to allow colleges to pay sales commissions to their recruiters.

Phoenix ran into trouble after the Obama Administration got serious about protecting U.S. troops and veterans from deceptive and abusive for-profit colleges practices, practices that led to high-dropout rates, overwhelming debt, and ruined financial futures. In a powerful speech at Fort Stewart, Georgia, in 2012, President Obama highlighted these abuses, such as the recruitment by for-profit Ashford University of a Marine with a brain injury. Obama called the conduct of some for-profits “appalling” and “disgraceful,” and he signed an executive order requiring greater accountability for schools enrolling service members and veterans.

The Pentagon suspension of Apollo was triggered by a 2015 investigative report in Reveal that exposed that the University of Phoenix paid the U.S. military for exclusive access to bases through sponsoring concerts and other events, sidestepping the Obama executive order. The school also held “résumé workshops” that seemed to be recruiting sessions, and it handed out “challenge coins” that included Phoenix logos on one side and, without the required permission, military branch insignias on the other side.

On October 7, 2015, a Pentagon official, Dawn Bilodeau, sent a letter to the University of Phoenix placing the school in probationary status while it considered whether to terminate its Memorandum of Understanding (MOU) with the school. Bilodeau cited the Reveal report, which was backed up by undercover footage and internal Phoenix documents, and wrote that a Department review “revealed several violations” of the MOU including “transgression of Defense Department policies regarding use of its official seals or other trademark insignia and failure to go through the responsible education advisor for each business related activity requiring access to the DoD installations” at Fort Worth, TX, Fort Bragg, NC, Fort Carson, CO, Fort Hood, TX, and Fort Campbell, KY.

Bilodeau wrote that the school had “responded to these infractions with appropriate corrective action at this time,” but she concluded, “the frequency and scope of these previous violations of the DoD MOU is disconcerting.” She also noted that the company was being investigated for deceptive practices by both the FTC and California’s Attorney General.

But in January 2016, following an aggressive public push to lift this ban by McCain, along with Senate education and labor committee chairman Lamar Alexander (R-TN) — a push McCain bragged about at last week’s hearing — the Pentagon on January 15 reversed course, ending the probation, and simply put the school on “heightened compliance review” for a year. The Pentagon, in a brief statement explaining its reversal, cited “the active engagement and cooperation by representatives of the University of Phoenix, and other relevant materials.”

But for John McCain, despite the documented abuses and failings at the University of Phoenix, a three-month Pentagon suspension of his favorite college was unforgivable.

Slightly more surprising than McCain’s predictable public tantrum was the testimony at the Armed Services hearing of Under Secretary of Defense Peter Levine, a former Democratic staff director of the committee whom McCain introduced as “an old friend.” At points Levine sought to justify administration policies aimed at channeling troops and Pentagon dollars into quality education programs, rather than predatory ones. But at other times, Levine threw the Obama administration and Pentagon policies under the bus, along with, it seemed, Bilodeau, who was seated beside him and another Pentagon official, Stephanie Barna.

Levine, who took pains to stress that he was not in charge of the relevant office when DoD suspended Phoenix, contended that the company did indeed violate recruiting rules, and a written statement submitted by all three Pentagon officials recounted numerous complaints against Phoenix in the year leading up to the Reveal article — the most against any school participating in the Pentagon tuition assistance program — and noted Phoenix’s failure to admit any mistakes.

But Levine told McCain that he thought the Pentagon’s process was “crappy,” because it failed to expressly warn the company in advance that it was considering suspension. And, he said, the Pentagon has now fixed its process so such a decision would never again be made be made by a lowly GS-15 level employee such as Bilodeau, but rather would be reviewed by a higher-up.

McCain himself notably sneered the phrase “GS-15,” sending bouquets of disrespect to hard-working but lower status federal employees who might not have been fortunate to have been born an admiral’s or senator’s son.

Levine also offered McCain the striking opinion that the administration’s interagency task force on for-profit colleges — created after the collapse of the awful Corinthian Colleges chain and amid mounting law enforcement probes of for-profit college abuses — should not “be targeting for-profits.” And Levine said the Pentagon took no position on reforming the federal 90/10 rule — which today allows for-profit colleges to get more than 90 percent of their revenue from federal dollars if they aggressively target veterans and service members — even though the White House and Department of Education actively support such a reform.

McCain was left unsatisfied by Levine’s mixed support for protecting troops from predatory colleges. He wanted more protections eliminated. He said he hoped that Trump might weaken Obama’s executive order.

Following McCain’s lead, other Republican Senators on the committee pressed the Pentagon witnesses for proof they were harassing non-profit schools as much as for-profits.

The staffers noted that DoD had punished not just Phoenix but also for-profit Heald College, which was owned by the now-shuttered Corinthian, another company McCain has defended, and in addition Globe University and the Minnesota School of Business. The staffers weren’t sure if those schools are for-profit and promised to find out. In fact, they are for-profit, they have the same owner, and they both were cut off from federal aid by the Department of Education this week because of their blatant misconduct. I hope the GOP Senators aren’t disappointed: Treating all schools equally should mean punishing bad behavior regardless of the type of school, rather than having punishment quotas for each higher ed sector.

But some of the GOP senators were all too happy to echo their chairman McCain, seeing no problem with the conduct of the University of Phoenix and a mess of problems with the conduct of Pentagon officials charged with protecting troops for predatory abuses. “This heavy-handed sort of interaction with these universities, as the University of Phoenix is just one example,” offered Senator Tom Tillis (R-NC), “has actually taken us further away from providing more resources for students to get those certificates and to get those diplomas.”

Thankfully, most Senate Democrats are now strong defenders of students and taxpayers on this issue, and one of the leaders in that effort spoke up at the Armed Services Committee hearing. “We have a responsibility I think,” said Senator Richard Blumenthal (D-CT), “to ensure that servicemen and women are not targeted and not recruited as a result of abuses and other kinds of practices that exploit them.”

While McCain derided the Reveal report that led to the DoD probe, one of the strongest Senate advocates for students, Dick Durbin (D-IL), who is Vice Chairman of the Senate Appropriations Subcommittee on Defense, offered a written statement to McCain’s committee recounting the serious allegations in the article and praising the Pentagon for taking action.

For-profit college companies like Apollo are apparently looking to Trump to reverse efforts by Obama to hold colleges accountable for waste, fraud, and abuse — because their schools are the ones that keep running afoul of the rules. But despite his own troubling interlude running the unaccredited Trump University (which did not take taxpayer money), a President Trump who is truly committed to fighting against waste, fraud, and abuse with taxpayer dollars would continue the efforts to hold predatory for-profit colleges accountable for misleading, overcharging, and under-educating students. Through the early 1990’s, Republicans favored such protections, before a toxic mix of campaign contributions, revolving door lobbying, and anti-Obama fervor made the for-profit college industry the GOP’s best rich boyfriend.

Even if Trump abandons the valuable work of the Obama administration to protect our troops, veterans, and other students from predatory colleges, the truth about these institutions will still matter, will still be exposed by investigative reporters, will still infuse the numerous investigations of for-profit colleges by law enforcement agencies, and still reach students, investors, and voters. And paid apologists like Senator McCain, who stand up for predatory companies over our hard-working troops and veterans, will have to keep facing these truths.

UPDATE 12-18-16:

On Friday, December 16, McCain continued his public tantrum on behalf of his home state donor the University of Phoenix by issuing a 33-page report, with lengthy attachments, on the Pentagon’s actions. The report, predictably, blames DoD and regular McCain target Senator Dick Durbin (D-IL), rather than the predatory practices of the University of Phoenix, for the dispute.

McCain’s report calls for disbandment “immediately” of the federal government’s interagency task force to address predatory for-profit colleges, a body created in the wake of the collapse of the awful for-profit Corinthian Colleges. The task force, chaired by the Department of Education and including the Federal Trade Commission, Securities and Exchange Commission, Consumer Financial Protection Bureau, and the Departments of Justice, Labor, Treasury, and Veterans Affairs, has helped to improve government efforts to protect veterans and other students — to share information and coordinate efforts. McCain demands that this task force disappear, because he feels it is “unaccountable” and is “targeted” at for-profits.

Fascinatingly, in the report McCain throws Corinthian under the bus: “While there have certainly been some bad actors in the industry, like Corinthian Colleges, Inc., which was found to have ‘engaged in deceptive practices’, the Administration’s assault on the industry has been unprecedented….” But barely a year ago, in an October 2015 floor speech, McCain defended Corinthian, which by then had collapsed, even though some for-profit college executives had stopped trying to do. In those 2015 remarks, McCain repeated a Wall Street Journal claim that the U.S. Department of Education, the Consumer Financial Protection Bureau, and California attorney general Kamala Harris “mounted a coordinated campaign that drove for-profit Corinthian College out of business.” McCain claimed these agencies acted “without any proof of misconduct.” It seems likely that McCain’s staff needs more institutional memory.

Share this:

Republic Report is dedicated to rooting out the corruption that is so corrosive to American values. We investigate and uncover the buying and selling of politicians and of institutions entrusted with upholding the public interest. We expose how big money distorts major policy decisions – harming our economy and our people.